The weekly (C)ORE Report will return on December 4, following the Thanksgiving holiday. In the meantime, stay close to steel market news by checking back here daily for the data found in (C)ORE. 

The second estimate for Q3 GDP released by the Bureau of Economic Analysis showed growth of 2.0% in the U.S. economy, down from an initial growth reading of 2.5%.  

While down from initial estimates last month, Q3 GDP remains at its highest level since Q1 2011 and equal to the 2.0% growth from Q3 2010.

Growth in Q3 GDP has boosted by positive contributions from personal spending, non-residential investments, exports and government spending.  The increase in government spending was solely boosted by federal spending, which climbed 1.9%; state and local government spending declined 1.4%.

That slowdown in state and local government spending, imports, and declines in private inventory investment kept GDP from showing more growth in the quarter.

Despite the slowdown in growth, this was still a positive reading for GDP.  The continued growth shown in the second estimate of Q3 GDP has nearly put an end to recession talks, for now anyway.

The weekly (C)ORE Report will return on December 4, following the Thanksgiving holiday. In the meantime, stay close to steel market news by checking back here daily for the data found in (C)ORE. 

Weekly domestic steel production increased for the second consecutive week after remaining flat the previous week.  Weekly steel production increased to an estimated 1,873k tons last week, at a capacity utilization rate of 75.6%.  This is up from 1,836k tons and a 74.1% capacity utilization rate the week prior.

Nearly all of the regions showed increases in production last week. The Lake Erie and Southern were the exception; these regions reported slight declines. The Northeast and Indiana-Chicago regions had the largest week-over-week increases, climbing 8.0% and 4.5%, respectively.

Year-to-date domestic production continued to be stronger than last year, up 7.3% from the same time frame a year ago.

The weekly (C)ORE Report will return on December 4, following the Thanksgiving holiday. In the meantime, stay close to steel market news by checking back here daily for the data found in (C)ORE.

After a slight increase in September, global steel production declined and has been down three of the last four months.  October’s global production of 3,999 tonnes/day was down 2.4% from September but still 5.6% higher than October 2010.  Year-to-date production continued to be well above (+8.0%) production over the same time frame in 2010.

The main reason for the decline in worldwide production was China, whose production slid 6.7% month-over-month to produce 1,764 tonnes/day in October.  North American production slid was well, down 1.5% from September.  A 2.4% decline from the U.S. helped to push NAFTA production lower.

Strong increases were seen in Japan, Russia and South Korea, climbing 3.2%, 5.5%, and 7.5%, respectively.  Indian production was flat at 198 tonnes/day, while Turkey production slid slightly by 0.4%.

While prices have been firming in the U.S. as of late, pricing remains soft throughout most of the world. With these soft prices, combined with the seasonal slowdowns caused by end-of-year holidays, it’s highly possible that global production could continue its mild decline in November.

While this week is shortened due to the Thanksgiving holiday, there is still plenty of important releases to fill your appetite if the turkey doesn’t do the trick.

1. Later this morning the existing home sales numbers for October are released.  After a strong increase in September the consensus for October is that sales to fall slightly.
2. Tuesday brings us the second revision to third quarter GDP.  The initial reading of 2.5% was well above the final Q2 reading and hopes are that this second revision continues that trend.
3. Wednesday, being the last day of the week is the busiest.  Not only do we get durable goods orders, we also get the weekly jobless claims data and final consumer sentiment index for November.
4. Black Friday deals often include steel-intensive products like washers, refrigerators and other appliances; expectations are high for this year’s sales. 

Remember that there will be no (C)ORE Report this week, so continue to follow the blog to stay up-to-date on steel market news.

Post #5
Driving Forces in Steel Pricing: #5 Buyer Confidence

The following is part five in a five-part series written by Majestic account manager Tim Quinn. Tim presented “Steel Made Simple” at the 2011 HARDI Conference in Maui, Hawaii.

#1 Raw Materials

#2 Supply

#3 Inventory

#4 Demand

#5 Buyer Confidence

“Mr. Hassebrock, I can tell you with 100% confidence that I am 50% sure there is a 25% chance pricing might be 10% lower this next next year.”

The psychological impact of previous markets has had a lingering effect on purchasing steel today. In rising markets, buyers fear the next increase. In falling markets they fear committing to any price. Today’s steel buyer can no longer react on emotion, but rather needs to become knowledgeable in all aspects of the global steel market. In short, an educated buyer is an empowered buyer.

When buyers are confident:

• Orders are placed
• Mill lead times increase
• Mills buy more raw materials
• Upward pressure on pricing

When buyers are fearful:

• Inventories run lean
• Mill lead-times shorten
• Pricing incentives surface
• Downward pressure on pricing

Everybody wants stability, but stability is a result of consistent buying patterns. Steel mills cannot plan for fluctuating buying patterns – so long as we experience volatility from steel buyers, we will continue to experience volatility in steel pricing.

To establish consistent buying patterns and stabilize volatility, there are two things you should remember:

1. Knowledge is power: Develop a habit of regularly monitoring market dynamics. You can do this by coming here, the (C)ORE Blog, daily, checking our Twitter account hourly, and signing up to receive a weekly summary in the (C)ORE Report. 


2. Buying long is buying wrong: Shift to a just-in-time steel purchasing strategy. By only buying what you need when you need it, you can minimize your risk, maximize cash flow and maintain a clean balance sheet. 

According the recent manufacturing index releases from ISM, some may think that the manufacturing sector, once the strong part of the economy, is starting to fade.  But the Federal Reserve’s industrial production index and capacity utilization rate show a different picture.

The industrial production index increased to 94.7 in October, up after being stuck at 94.1 the previous three months.  The index also showed year-over-year increases for the 22nd consecutive month and had the fastest year-over-year increase (4.0%) since September 2010.  

The continued increase in industrial production was boosted in October by continued strong growth from manufacturing of durable goods.  The index reading of 94.0 was up strongly from 93.3 in September.  Being a strong sector for steel demand, durable goods manufacturing growth continues to be a bright spot for the steel industry.

The overall capacity utilization rate continued to climb as well, increasing to 77.8% in October, up from 77.3% in September. Capacity utilization increasing to its highest level since August 2008 suggests that the suffering employment market might soon get a boost, if manufacturers boost employment numbers to accommodate the increased production.

Overall, the increases in both industrial production and capacity utilization are positive for the economy, and when combined with the Empire Manufacturing Index from earlier this week, manufacturing has once again began to show some strength.